2 small-cap ASX shares licking their lips over interest rate cuts

It’s a no-brainer that the ASX shares most impacted by 13 interest rate rises would be in the finance sector.

With rates nearing their peak, and maybe even a cut looming soon, the analysts at Celeste Funds recently named two such small-cap stocks that they think will shoot up in the coming period.

Let’s check out why they’re bullish:

A ‘sound’ and ‘well-capitalised’ business

Judo Capital Holdings Ltd (ASX: JDO) will certainly be happier when its small and medium-sized business clientele have more confidence to borrow.

Maybe it’s already starting to happen, with the shares rocketing an amazing 18% in January.

The Celeste team, in a memo to clients, attributed the excitement to a trading update.

“Front book lending margins expanded, reflecting the attractiveness of Judo’s customer proposition and resulted in a net interest margin (NIM) of 3.02%.”

This boost in margin fed into an improved bottom line.

“This saw 1H24 profit before tax of $67 million, ahead of consensus estimates.”

The full year prospects remain positive.

“Ongoing cost management should result in a FY24 cost-to-income ratio of 55-57%. Credit quality remains sound and the business is well-capitalised.”

The small-cap looking good for a major comeback

As a debt buyer, Credit Corp Group Limited (ASX: CCP)’s prospects are brighter when consumers are struggling.

However, last year was a shocker for its stock price as the US arm performed poorly.

But the shares rose 6.2% last month, perhaps ushering in a new phase of revival.

“Pleasingly, US collections productivity has shown steady improvement over 2023 following a challenging 2022,” read the Celeste memo.

“The US delinquency environment has stabilised since the AGM, with debt ledger prices significantly lower.”

This improvement has allowed the company to narrow down its full-year purchasing guidance towards the top end of the previously mentioned range.

“Australian collections lagged as system volumes remained subdued, however prudent management saw relatively flat cost metrics. 

“The lending business experienced strong demand, with net lending guidance upgraded from $50 million to $145 million.”

The Celeste team’s peers are largely in agreement, with six out of nine analysts surveyed on CMC Invest rating Credit Corp as a strong buy.

The post 2 small-cap ASX shares licking their lips over interest rate cuts appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Judo Capital. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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